Measures for Stable Implementation of New Insurance Accounting Standard IFRS 17

On April 11, 2024, the financial authorities announced their supervisory goals and key initiatives for the stable implementation of the International Financial Reporting Standard 17 (“IFRS 17”), a new insurance accounting standard.

Since 2023, when IFRS 17 came into force to evaluate the market value of insurance liabilities, the financial authorities presented guidelines and took action to minimize confusion in the market. They operated a “Closing Review Task Force” to facilitate a smooth transition to IFRS 17, helping the insurance industry complete its first year-end closing under the new insurance accounting standard.

Additionally, the financial authorities outlined three supervisory goals, along with key initiatives, to support the implementation of IFRS 17. The key details are summarized as follows:

Strengthen Mechanism for Systematically Responding to and Managing Issues Related to IFRS 17

IFRS 17 issues involve various factors, ranging from insurance accounting and actuarial practices to insurance products. Therefore, the Financial Supervisory Service (the “FSS”) plans to organize a joint consultative council between its insurance and accounting departments, with participation from external experts depending on the topic.
In addition, a prompt review process will be systematically managed by operating an IFRS 17 hotline (i.e., a shared email account), through which related issues can be reported. Issues that could have a major impact on business practices will be carefully reviewed and addressed through the joint consultative council, while other issues will be promptly handled by relevant departments.

Enhance Reviews and Communication

A three-step review system will be established: (i) insurers will conduct a self-review based on a checklist prepared by the FSS, (ii) peer reviews and feedback among insurers will improve the review process’s promptness and effectiveness, and (iii) the FSS will monitor business processes and conduct on-site reviews with the participation of external experts.
Further, discussions will be held with financial information producers (i.e., insurers’ employees in charge of financial closing), verifiers (i.e., external auditors), and users (i.e., analysts, journalists, etc.) to identify issues at an early stage and receive suggestions.

3.	Implement Temporary Grace Period A temporary grace period is scheduled for 2024, which is an acknowledgement that Korea is in the early stage of IFRS 17 implementation and there may be discrepancies in interpreting the Statement of Corporate Accounting Standards.

Since IFRS 17 standard does not provide specific methodology and the Korean insurance industry lacks sufficient experience in measuring the market value of insurance liabilities, the financial authorities’ efforts, including the operation of the joint consultative council and the provision of guidance to the industry, are expected to reduce uncertainties related to IFRS 17.

[Korean Version]

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